Finally, a cash Isa alternative

Money&Co’s innovative Finance Isa pays around 7.3 per cent a year

SAVERS looking for a higher rate of interest than they can get on cash now have an innovative alternative for this year’s Isa allowance.

The new Innovative Finance Isa from Money&Co pays around 7.3 per cent a year, far more than the 1 per cent paid by the average cash Isa.

Better still, this inflation-busting return is totally free of tax because you can invest inside your annual £20,000 Isa allowance.

Renowned fund manager Nicola Horlick, who founded Money&Co, said the Innovative Finance Isa, or Ifisa, offers an exciting alternative to traditional cash and stocks and shares Isas. “The concept may be unfamiliar but it is rapidly becoming established as a way of getting a far higher yield on your money.”

Money&Co gives you access to the more generous returns available from peer-to-peer (P2P) lending platforms, which bring savers and borrowers together with no banking middleman in between.

Horlick said after years of rock bottom interest rates savers deserve much better. “Instead of leaving your money languishing in cash you can make it work harder elsewhere.” LENDING CRITERIA You could invest your entire £20,000 allowance with Money&Co before this year’s Isa deadline on April 5, or smaller sums instead.

Horlick said you can also transfer over any existing Isas you have taken out in previous tax years. “They may now be offering you a negligible return and by leaving them there you are just throwing money away.”

The UK government launched the Innovative Finance Isa in April 2016 to give savers a tax-free way to invest in British businesses.

Money&Co lends your money directly to established companies looking to borrow money to fund their expansion.

The yield is not guaranteed and your capital is at risk. P2P lending is not protected by the Financial Services Compensation Scheme.

However, all P2P platforms must be regulated by City watchdog the Financial Conduct Authority and Horlick said Money&Co offers further safeguards to reduce the risks. “We only lend to profitable UK businesses which have been trading for at least three full years.”

She added that every business is carefully vetted by Money&Co’s head of credit and must pass strict lending criteria. “Most will have valuable assets such as property or manufacturing equipment which can be used as security in case of defaults and bad debts.”

This reduces the chance of making any losses, she said. “Money&Co has been lending since April 2014 and there have been no bad debts to date, and minimal defaults.” RISKS AND REWARDS You can choose which companies you’ll lend to, and Money&Co gives each a credit rating based on the level of risk.

There are five credit ratings, ranging from A+ for the safest to C+ for the most risky.

An A+ loan is likely to yield around 7 per cent, but with a little more risk you could get as much as 9 or 10 per cent.

Additionally, the average yield across all Money&Co loans is 8.6 per cent, minus annual charges of 1 per cent.

No cash Isa comes close to beating that.